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Budget 2021- What’s in it for MSMEs

Higher outlay and growth measures in Budget’21 are designed to give MSMEs a boost. How can MSMEs overcome operational issues to better leverage this impetus and script their growth path? Read here.

The Budget 2021 presented by Finance Minister Nirmala Sitharaman was set against an unprecedented shock from a pandemic that stifled economic growth and locked down the country and its economy, thus making this by far one of the most critical budgets for the government. The Finance Minister stressed that the focus has been to revive the economy by providing every opportunity for the economy to grow sustainably.

Focusing on the Micro, Small and Medium Enterprises (MSMEs), even before the COVID pandemic, this sector was struggling to cope with demonetization and GST. With the advent of COVID and its effect in slowing down the economy, MSMEs were hit harder. There are six crore MSMEs in India that constitute 40 per cent of the non-farm employment. Hence, it would be fair to say that they are the backbone of India’s economy and a critical component to its revival. While the budget in itself is extensive and aims at bringing the economy back to normal, what does this budget do for the MSME sector?



Increase in Capital Expenditure

The 2021-22 Budget has doubled the allocation on capital expenditure with a focus on the MSME sector, to INR 15,700 crores with emphasis on healthcare, education, infrastructure, textiles, and digitization. The budget has also focused on promoting domestic manufacturing through Production Linked Incentive schemes and Atmanirbhar Bharat. These measures will help pave the way for a higher role in the growth and employment of MSMEs in India. 



Relaxing Compliance and Audit Norms - Redefining Small Businesses 

The FM has proposed to revise the definition of a small company by increasing the threshold for paid-up capital to Rs 2 crore from Rs 50 lakh and turnover from INR 2 crore to INR 20 crore, which means that more businesses will now be classified as small businesses, thus benefitting more than two lakh companies. The audit exemption limit for MSMEs has also been raised to INR 10 crore turnover from the existing INR 5 crore turnover. This will allow lakhs of MSMEs to run their businesses more smoothly and benefit from a lighter compliance burden.

The budget also announced strengthening the National Company Law Tribunal (NCLT) framework to ensure faster resolution of cases. Also, the announcement of setting up a committee for faceless dispute resolution will help MSMEs in hassle-free resolution of disputes.



Relaxation of Duties on Certain Product Categories

The customs duty has been reduced on products of alloy, non-alloy, and stainless steels, along with a duty exemption on steel scrap for a period up to March 31, 2022. The customs duty on copper scrap has also been reduced. Additionally, customs duty on finished synthetic gemstones has been raised to encourage their domestic processing. These measures will significantly be beneficial to MSMEs in reducing their variable cost.



Helping Start-Ups

The 2021-22 Union Budget has relaxed norms around setting up businesses and incentivizing funding for start-ups. To promote and increase investments in start-ups, capital gains have been exempted for investments by one more year until March 31, 2022. The incorporation of ‘One Person Companies’ (OPCs) will help in promoting start-ups and innovation without any restrictions on paid-up capital and turnover. It also reduces the residency time limit for an Indian citizen to set up an OPC from 182 days to 120 days. NRIs can also incorporate OPCs in India.

All in all, this budget aims to acknowledge the MSME sector as the backbone of the Indian economy and thus strengthen it for a robust and growing economy.



Way Forward for MSMEs

The nearly double increase in the allocation of INR 15,700 crores to MSMEs opens up huge opportunities for the MSME sector, while enhancing custom duty on a wide range of items to promote Atmanirbhar Bharat will create a huge demand for MSME products.


MSMEs have played an important role in the Indian economy. They contribute to one-third of the country's GDP and provide employment to a large segment of the non-formal sector. Hence, it becomes imperative for MSMEs to grow to help give the economy a vertical push.  


The ease of doing business, reporting, approvals and compliance requirements for MSMEs continue to border on the difficult side. While MSMEs gear up to grow their business at this juncture, they also need to solve these operational challenges that stifle their efficiency and profitability. One area where digitization can help MSMEs deal with some of these operational challenges is through e-procurement. Online B2B or e-procurement channels help businesses streamline and create a more efficient procurement process. Fortunately, we have B2B e-commerce platforms like Amazon Business that can be a great ally to the MSME community to accelerate their business by helping them become more efficient with their buying process.

Amazon Business helps MSMEs simplify their buying process and make it more efficient. It provides a wide selection of products, large discounts leading to huge savings, hassle-free ordering and delivery, uninterrupted access to sellers across the country through a robust supply chain network, and features that improve process efficiency, transparency and aid in greater compliance.


With Amazon Business, MSMEs can purchase products for all their business needs with a GST invoice and save up to 28% more with input tax credit while easing up the compliance requirement in the process. Through features like multi user accounts, shared pay and approvals, Amazon Business helps large procurement teams create and manage an efficient and transparent procurement process. With Amazon Business, MSMEs can not only save on their procurement costs but also on the time and effort going behind the purchase process thereby freeing up resources that can be put to more productive use for growing the business.

In Amazon Business, MSMEs have found a trusted partner in their growth journey that will ultimately fuel the Indian economy to an established powerhouse.


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